Evolving candy products can lure new consumers into indulgence

Bite-size? Shareable? What about products that morph into something new? These are all factors that play a role in the world of confection today.

According to the National Confectioners Association (NCA), brand and mood lead the candy decision tree, making variety, including new item introductions, very important. In 2013, retailers added seven new items across channels that generated $890 million in new item sales.

“In 2013, business was big, growing and profitable,” says Larry Wilson, NCA’s vice president of customer relations. “The total confectionery market reached $33.6 billion in 2013—marking the sixth consecutive year of sales growth. Chocolate is the biggest segment and grew the fastest at 3.6% vs. 2012. Additionally, the outlook for 2014 and beyond is very positive.”

However, some traditional candy brands need some excitement to revive flat performances, and new entries could provide that lift. The migration into new brand formulations is something that is “important for reasons beyond sales,” says Susan Viamari, editor of Chicago-based research firm IRI’s Times & Trends. “It’s motivated by the need to create excitement and buzz factor, which seems to be equally important [to sales].”

While there are certainly bona fide examples of brands that branch out into all new product categories—Special K comes to mind—the process naturally has its share of short-term upside coupled with uncertainty about longevity. None of the decisions regarding product line extensions are embarked upon lightly. At The Hershey Co., the approach is methodical.

“Our category and consumer knowledge and insights is embedded in all of our business decisions. ... Hershey has a team dedicated to uncovering the necessary data, trends and insights to successfully shape future innovations and line extensions,” says Brandy Woolford, associate manager of brand public relations for The Hershey Co., Hershey, Pa. “This detailed research allows us to discover new and innovative opportunities in the candy and snack aisles such as Ice Breakers Cool Blast Chews and Hershey’s Spreads.”

That doesn’t mean the new products are obvious additions to a set, either.

When Randy Adams caught wind of the launch of Butterfinger Peanut Butter Cups earlier this year, he sensed opportunity—but with a caveat. He shuddered when thinking about the category-management challenge of properly calibrating his confection department all over again.

“You have mixed feeling,” says Adams, center-store category manager for the 113- unit Huck’s Convenience Stores, Carmi, Ill. “I’ve been doing this a long time, and these line extensions are often temporary blips on the radar that don’t sustain momentum. I’m a bit jaded by the hype that accompanies a new offer that fails to live up to its promise. I remember ‘sure things’ where we gave it a lot of play in the stores, and it ultimately failed.”

Adams believes brand cannibalization is always possible for brands that make a radical turn in package and formulation characteristics, but he cites one example in which past is prologue. “Years ago, Werther’s Original USA launched a soft-chew line extension, and the two versions were able to coexist nicely. I think it’s a case of two different consumers—someone with a dry mouth opts for the hard Werther’s, while the soft candy is for a different occasion. That same idea would apply to Jolly Rancher’s [new Bites soft chews].”

As for the Butterfinger Peanut Butter Cups two-cup single pack and four-cup shareable king pack, Adams says so far it has not cannibalized the flagship Butterfinger. Moreover, he says that it has not eaten into his sales of Reese’s Peanut Butter Cups, which has a loyal following of its own. It’s all incremental.

Indeed, from Hershey’s perspective, line extensions definitely bring in new users. “These types of line extensions generate incremental sales and provide opportunities to gain new consumers to grow the category,” Woolford says.

Single-Bar Boosters

Impulse combined with product-positioning strategies are crucial for getting strong returns on line extensions such as these, because 31% of all confection purchases are made in secondary locations, according to McLane Co., Temple, Texas. Convenience stores account for $5.3 billion in sales and possess a 23% share of total U.S. confectionery sales.